How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity

Siebert, Ralph and Graevenitz, Georg von (April 2006): How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity. SFB/TR 15 Discussion Paper No. 105

Abstract

In a patent thicket licensing provides a mechanism to either avoid or resolve hold-up. Firms' R&D incentives will differ depending on how licensing is used. In this paper we study the choice between ex ante licensing to avoid hold-up and ex post licensing to resolve it. Building on a theoretical model of a patent portfolio race, firms' choices of licensing contracts are modelled. We derive several hypotheses from the model and find support for these using data from the semiconductor industry. The empirical results show that firms' relationships in product markets and technology space jointly determine the type of licensing contract chosen. Implications for the regulation of licensing are discussed. We estimate a dynamic panel data model with unobserved heterogeneity and a lagged dependent variable. A method suggested by Wooldridge (2005) is employed to estimate a random effects probit model using conditional maximum likelihood.

• Item Type: Paper
• Keywords: Hold-Up Problem, Licensing, Innovation, Patent Race, Patent Thicket
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B2 - Wagniskapitalfinanzierte Unternehmen in Deutschland - Finanzierungskontrakte, Organisationsstrukturen und Eigentumsrechte
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: L13, L49, L63
• Language: English